Barclays raises Treasury yield forecasts

DeborahLevine

NEW YORK (MarketWatch) -- Barclays Capital said Friday it was raising its forecasts for Treasury yields as economic data has come in better than expected, while investors are becoming more concerned about the Federal reserve's monetary policy and the federal government's deficits. "We are revising our rates forecast higher for 2011 given further strengthening of data, increased perception of monetary policy mistakes and the worsening of the fiscal outlook," analysts led by Ajay Rajadhyaksha wrote in a report. The firm now sees 2-year yields
TMUBMUSD02Y, +0.90%
rising to 1.1% at the end of the year, compared to a previous forecast of 0.8% and 0.76% currently. Yields on 10-year notes
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will rise to 3.75%, from a previous forecast of 3.5% and 3.65% currently. Barclays said longer-dated debt especially has sold off as investors are more concerned about overall inflation rates moving higher, while Fed officials have focused on inflation excluding food and energy, which remains low.

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